Market determination system

ABSTRACT

A market analysis system uses travel time to define a relevant market area. A map is generated using stored geographical map information around a selected geographical point or area, and a travel time around the geographical point or area is selected. A trace is formed on the map around the geographical point within the travel time using travel time data, and market information is gathered from a database for the defined geographical area.

RELATED APPLICATIONS

This is a continuation of Application No. 10/410,554, filed Apr. 10,2003, now U.S. Pat. No. 7,043,445 which is a continuation of 09/095,802,filed Jun. 11, 1998, now U.S. Pat. No. 6,604,083 which claims priorityto U.S. provisional Application No. 60/049,448 filed Jun. 12, 1997, allof which are incorporated herein by reference.

BACKGROUND OF THE INVENTION

1. Field of the Invention

This invention generally relates to a system for use in market analysis.More particularly, the system relates to using geographical mapdatabases and geographical travel time information to determine a demandand supply for a market area.

2. Description of the Related Art

Before setting up a new business or buying an existing business, anentrepreneur wants to know the potential profitability of the business.To determine profitability, the net demand for the product or servicemust be determined. One important factor in determining net demand isthe location of the business and the defined market area. Using thedefined market area a supply and demand are determined. The net demandis found by subtracting existing supply from demand in the definedmarket area.

Market studies are performed in order to identify the supply and demandfor a site in an area. This process may be carried out in many differentways because of differing definitions of the market area of interest.The market area of interest is the area in which customers reside andthe area in which competitors are likely to be located.

Market analysts determine supply information by researching an area andfinding out information such as the number and types of competitorsites. Generally, market analysts look at many different demographiccomponents to determine demand. For example, one component ofdemographic demand for an assisted living home may be that a certainpercentage of those aged 65 to 75 in the area who have incomes over$25,000 will enter the proposed assisted living home. Based on thenumber of people in the age group 65-75, one may estimate the number ofpeople and dollars that will be spent at the assisted living home bythis age group. An accumulation of these data for each age groupestimates gross revenue for the assisted living home.

One source of information about the characteristics of people in an areais the U.S. Bureau of Census, which counts people and keeps record ofthe number of people living in a defined area along with otheridentification data. The Census Bureau accumulates this information byhouse and by individual but for privacy reasons only releasesinformation in groups. The smallest group normally released is a blockgroup. A block group is about 200 households. A group of four to sixblock groups is called a census tract. A census tract tends to besmaller than a zipcode and is commonly used to aggregate informationabout an area. The census bureau maintains this information in databasesthat may be purchased or accessed by the public. These databases includelists of block groups and demographic information associated with theblock groups.

Another source of information needed is geographical information thatlinks an area to the census information. Geographic information systemsexist that include typical map data such as geographical features,roads, and landmarks as well as the boundaries for block groups. Thegeographical linear features, such as roads or geographic boundaries,are stored as polylines. The geographical area features, such as blockgroups, census tracts, and counties, are stored as polygons enclosed bypolylines. The two are stored in a table together with censusidentifying data, which allows the geographical areas to be tied todemographic characteristics in the census databases.

One type of study performed by a market analyst is a point study. Apoint study is performed when an investor wishes to know the demand fora business at a particular site. To calculate demand for a business at ageographical point, an analyst must define a market area surroundingthat point for the given business. Typically an analyst will define morethan one market area, such as a primary and secondary market area. Onesimple method an analyst may use is to plot the site on a map and draw acircle around of the site of a given radius. The first radius selectionof, for example, ten miles could be the primary market area, and asecond selection of, for example, the next ten miles could be thesecondary market area.

Previously, a market analyst would select some section of the map andassume that this is the market area. Often, a junior member of theanalyst's firm goes out into a community and talks to the people ofinterest and uses the gathered information to define a market area.Then, to determine demand, a market analyst would calculate the numberof potential purchasers in that area and the amount that these potentialpurchasers are expected to spend using the census information, todetermine supply, the analyst would look at other suppliers in themarket area. Using both the supply and demand information, a net demandcan be determined. There are no set standards of how the initial marketarea is selected or which census tracts or block groups are included inthat market area. The results may be easily manipulated by simplyredefining the market area, thus greatly reducing the legitimacy of suchstudies because the results are not replicable by another analyst withthe same skills and background.

A system is needed that standardizes the selection of a market area andallows for reproducible studies.

SUMMARY OF THE INVENTION

Systems and methods consistent with the principles of the presentinvention address the need for standardization of market selection bydefining a market area based on travel time from the site.

A system and method consistent with the principles of the presentinvention selects a primary and a secondary market area based on traveltime. More than two market areas may also be selected. In addition blockgroups are accepted as being within the market area based on certainrules, thereby standardizing their selection.

Systems and methods consistent with the present invention generate a mapusing stored geographical information. A geographical point or area isselected from the map for analysis. A travel time around thegeographical point is selected. The geographical area around thegeographical point within the travel time is defined using data holdingtravel time information. Market information stored in a database isgathered for the defined geographical area from a memory location.Demand is computed from the demographic groups in eachtravel-time-defined area and weighted according to the model used by theanalyst. Supply of competition is computed by surveying the competitionand plotting each on the map, weighing the results by travel time andother factors according to the model used by the analyst. The finalresult, net demand, is the difference between demand and supply.

BRIEF DESCRIPTION OF THE DRAWINGS

The accompanying drawings, which are incorporated in and constitute apart of this specification, illustrate an embodiment of the inventionand, together with the description, explain the objects, advantages, andprinciples of the invention. In the drawings:

FIG. 1 is an overall diagram of a system for implementing the presentinvention;

FIG. 2 is a flow chart showing the steps for selecting a type of marketanalysis;

FIG. 3 is a flow chart showing the steps for performing market analysis;

FIGS. 4 a-4 c are example display screens showing information related toa market demand model;

FIGS. 5 a-5 e are example display screens showing a map and associatetravel time traces;

FIG. 6 is a flowchart showing additional steps for performing marketanalysis by using demographic data;

FIG. 7 is a sample screen display of a map with block groups;

FIG. 8 is a flowchart showing additional steps for performing marketanalysis including summing demographic data;

FIG. 9 is a flowchart showing additional steps for performing marketanalysis including calculating supply and demand; and

FIG. 10 is a flowchart showing the steps for an area feasibility study.

DETAILED DESCRIPTION OF THE INVENTION

The following detailed description refers to the accompanying drawingsin which the same reference numbers in different drawings identify thesame or similar elements. However, the following description does notlimit the invention. Instead, the scope of the invention is defined bythe appended claims and equivalents.

The present invention provides a way of defining the market area thatmay be repeated by another analyst which allows for a standard in theindustry. Instead of using miles around a point which ignores barrierslike a river or using psychological boundaries, which are notreplicable, the present invention uses travel time. A database containsthe travel time traces from the proposed site in the geographical areaunder study.

The analyst selects travel times based on empirical research thatrelates travel time to use of the proposed facility. Where existingempirical research is inadequate or not available then the travel timeis selected using a reasonable estimate of an experienced analyst.Travel time is objective unlike other methods used such as basing marketarea on psychological characteristics of the population. This lattermethod has no rules about where the market will begin and end.

Using travel time to define a market area is most reliable when thebusiness or service draws local patronage. For example, assisted livingfacilities are typically selected that are either close to thedisabled's home if the spouse remains active or close to the home of arelative.

FIG. 1 shows a block diagram of a processor configured in a mannerconsistent with the present invention. A processor 100 receives inputfrom an input device 105 and displays information on a display 110.Memory 120 includes a module with geographic information system program(GIS) 122, a module with travel time program 126, a processing module127, a module with demand model program 128, and a module with supplymodel program 129. The module with demand model program 128 includes,for the area under consideration, empirical relationships or assumptionsconcerning the relationships between demographic demand and travel time,such as the decay of demand with increased travel time from the site.The module with supply model program 129 includes, if available for thearea under consideration, empirical relationships or assumptionsconcerning the relationships between supply of competition and traveltime.

Data in the geographical information database 124, includes politicalboundaries, census unit boundaries, natural topographical boundariesincluding rivers and roads. The database of demographic information 130includes supply data 132, demand data 134, and a census database 136.Supply data 132 is data related to competition such as other stores inan area. Demand data are demographic information providing informationon the population in an area. Census database 136 includes informationrelating the census units to demand data 134 and supply data 132.

FIG. 2 is a flowchart showing the initial steps 200 taken by an analystto a market analysis. First, a market analyst, using input device 105,must select a type of market study (step 210). Generally, a marketanalyst may select one of two types of market analysis—a pointfeasibility study or an area feasibility study (step 220). The pointfeasibility study determines the market analysis for a site in aspecific location.

An area analysis study is used to try to determine the best sitelocations in a general area. An analyst performs an area study when aninvestor wishes to find what point within a geographical area is bestfor business. In the prior art, only a few points were processed as itwas time consuming to analyze each point. An area study using thepresent invention, involves analyzing every possible point in an areausing the point analysis. In one implementation some points on the map,such as those where bodies of water lay or a large factory exists, willnot be analyzed. Generally, in the present invention, an area analysisallows the analyst to select a geographical area and to iterate a pointanalysis for almost every point within that area equal to the number ofdemographic units (e.g. block groups, census tracts), covering the areacompletely.

If a point feasibility is selected, the analyst must select a specificgeographical point (step 230). For an area analysis the analyst mustselect a geographical area and processing continues at B in FIG. 9 (step240). The point feasibility study determines the market analysis for asite in a specific location.

If point analysis is selected processing continues as shown in steps 300in FIG. 3. First, the analyst traces an area around the geographicalpoint that encompasses any potential market area using knowledge knownto the analysts such as type of neighborhoods around the point (step310). The analyst also has access to many other sources of dataincluding information obtained from the Bureau of the Census and othersources. GIS programs, such as that in GIS module 122, create a map forthe traced area around the geographical point (step 320). The analystmay specify the different attributes of the displayed map, for example,the units that the map uses in terms of scale (centimeters per mile) orwhat natural formations the user wishes to have included. The user mayselect to display streets, landmarks, county boundaries, towns, Censusboundaries, and many different types of units. The GIS program 122generates the map by reading data from geographic database 124 thatholds map information.

The analyst selects constraints to define the supply model module 129and demand model module 128 (step 330). The analyst uses a model thatdefines the weight that will be given to different information. Forexample, based on available empirical evidence for a certain service,the customer base may exclude anyone under 20 and give no weight to dataon those under 20. On the other hand, the most likely customers for acertain business may be aged 30 to 40, in which case the demand modelwill weigh more highly people in that age group and a greater percentageof those in the age group of 30 to 40 will be presumed to be customers.Similarly, a smaller percentage of those in the age group 40 to 50 willbe presumed to be customers. Another constraint in the models may beassigning different percentages for each travel time trace around thesite based on the closeness of the trace to the site.

FIG. 4 a shows an example display 400 of different weights assigned todifferent travel traces. The closer to the site a census unit is, themore likely customers will come from that census unit. The demand isdetermined by adding up the number of people, the demand model definesto be of interest. The supply is determined by using gatheredinformation about other suppliers in the area. The net demand is theprojected demand in the area minus the supply in that area. If the netdemand is positive, with the demand greater than supply, the project maybe desirable. If the demand is negative, with demand less than thecurrent supply, then the project is not desirable.

One example of a demand model is for assisted living homes. Onecomponent of the demand model is the percentage of people in given agegroups that require care. FIG. 4 b shows a chart listing various agegroups and the percentage of people in those groups requiring twodifferent levels of care.

Another criterion for the demand model may be related to housing values.Population groups may be weighted differently based on the median homevalues in the block group. FIG. 4 c shows an example of a map of censusblock groups with different shadings provided based on the median housevalue. The model may weight more highly the population in higher pricedhome value block groups. Therefore, this example model has ageconstraints, disability constraints and housing value constraints. Thecalculation of demand will adjust the weight given to a population groupbased on age, disability and housing values.

Processing module 127 prompts the analyst to select a maximum traveltime that encompasses the traced area (step 340). FIG. 5 a shows adisplay of a map 500 with the selected geographical point A at thecenter and a time travel trace 510 around the point. The selectedmaximum travel time is usually in minutes, for example, a tracerepresenting a 20 minute trip from the point may be a likely market areadepending on the business. Travel time program module 126 maps themaximum travel time trace from the site and maps decreasing intervalsuntil the site is reached (step 350). The result is concentric tracesaround the site. Another example of an interval trace would contain atrace for every few minutes of additional travel time. FIG. 5 b shows amap 500 with three travel time traces 510, 520, and 530 at differentintervals from the site. FIG. 5 c shows the first travel trace closestto the site representing a 17 minute travel time around the site. FIG. 5d shows a second travel trace representing travel times between 17 and30 minutes around the site. FIG. 5 e shows a third travel tracerepresenting travel times between 30 and 45 minutes around the site.

The travel time program module 128 uses available travel time databasesand generally operates as follows. A database of street networks, suchas the Bureau of the Census' Tiger Street Files, has information ontravel rates on different roads. The street file is converted into anetwork of nodes (intersections) and connections between the nodes(streets). Each line segment (street) has associated data about theclass of road and other information such as one-way street or no leftturns. The class of road determines the average speed or rate (R) to beused and the length of the line segment defines a distance (D). The timeto travel over a line segment is found by dividing distance (D) by therate (R). The program 128 solves the network by following every possiblepath from the geographical point selected and sums the travel times foreach segment until the travel time selected is reached at a point on themap. The resulting points around the selected point form an irregulartrace of the market area.

Processing continues in FIG. 6 which shows flowchart 600 with additionalprocessing steps. Travel time program module 126 displays a map havingtypical map information such as rivers and roads using data in thegeographic database 125 for the traced area (step 610). The map alsoshows the concentric travel time traces. The analyst must now select atype of census boundary to be used in the market analysis such as ablock group, census tract, or county lines (step 620). For simplicitythe specific example used throughout this application will assume thatthe analyst selects block groups as the unit of interest. Next GISmodule 122 loads and displays the census boundary type on the map areawithin the maximum travel time (step 630). FIG. 7 shows a map display700 with block groups inserted.

Processing module 127 creates a market area table with an entry for eachcensus unit displayed (step 640). Columns are included for each variablein the supply and demand models and data corresponding to the variablesis copied from the demographic information database 130.

FIG. 8 shows a flowchart 800 with additional steps for analyzing amarket consistent with the present invention. The analyst must nowselect which block groups to include in the market study. For example,some block groups may only be partially within the maximum travel time,therefore the analyst must decide how to select which groups to includein the analysis and the weight to be provided to each group. For examplein FIG. 7, block group 710 is a group only partially within the traveltime trace 510. The analyst may select a rule to choose block groups(step 810). One example rule is to determine the centroid of a blockgroup and if the centroid is within the travel time trace include theentire block group in the analysis, otherwise do not. Processing module127 uses the identified rule to select the appropriate census units tobe counted (step 820). The market area table created by the processingmodule 127 is sorted to separate the selected and non-selected blockgroups (step 830). In FIG. 7, block group 710 has a center that is notwithin the travel trace 510, this block group is not selected using theexample rule. Processing module 127 sums the column data for each of therows selected (step 840) and stores the same (step 850). Each columncorresponds to a variable in the demand or supply model. The summedresults for a column is the total value for the associated variable.

Entry point G shown above step 830 is where processing begins foradditional traces of market area to be studied. Each travel time areatrace may be successively processed. Therefore, after summing thecolumns for a particular market area, if results for shorter travel timetraces exist, the current summed results are added to the previouslyobtained summed results (step 860). The demand or supply model mayrequire that before summing results from different iterations, eachiteration's trace be provided a different weighted value, the weightsbeing empirically based when possible. Therefore, the summed value ofthe supply or demand components for a trace may first be multiplied by aweighting factor reflecting that trace's closeness to the business site.

FIG. 9 shows a flowchart 900 for further processing market analysisaccording to the present invention. Processing module 127 determineswhether the demand and supply models require additional iterations forprocessing additional traces of travel time (step 920). If so,processing repeats starting at step 830 in FIG. 8. Otherwise, the finalsummed results are displayed (step 930). The market estimate of supplyand demand is determined (step 940). This estimate may be based oncalculations of the market and demand supply models or may be input byan analyst reviewing the displayed summed column data. The estimatedsupply is subtracted from the demand to obtain the net demand (step950). The point feasibility study is complete (step 960).

FIG. 10 shows a flowchart 1000 that includes the steps for an areafeasibility study. As previously discussed, an area feasibility study isperformed by selecting rule that defines one point within each of thecensus or administrative boundaries such as block group. First, theanalyst selects a geographical area to be researched (step 1010). Theanalyst must select a unit such as a block group or some other boundaryto use in the analysis (step 1020). Then, each unit within the selectedarea is given a row in a newly created storage table containing a recordfor each unit, such as a block group (step 1030). The point feasibilitystudy is repeated for all possible points within the area (step 1040).Processing module 127 fills in the table with the results of the pointstudies for each census. unit as the point studies are performed (step1050). Processing module 127 uses display 110 to display a map withcolor coded filling to show the different demand levels calculated foreach census unit (step 1060). The market area analysis is the complete(step 1070).

The foregoing description of preferred embodiments of the presentinvention provides illustration and description, but is not intended tobe exhaustive or to limit the invention to the precise form disclosed.Modifications and variations are possible in light of the aboveteachings or may be acquired from practice of the invention. The scopeof the invention is defined by the claims and their equivalents.

For example, although systems and methods consistent with the presentinvention are described as using block groups as the defined unit ofmeasurement, one skilled in the art will appreciate that the presentinvention can be practiced using other units of measurement ordefinitions of map areas. Also, although systems and methods consistentwith the present invention are described as using a primary andsecondary market travel trace time, one skilled in the art willappreciate that the present invention can-be practiced using fewer orgreater numbers of travel time traces.

1. A data processor implemented method for determining a demand for atleast one business located in a market area, the method comprising:receiving a location input for the at least one business; calculating aplurality of travel time traces around at least one business locationusing at least one geographical information system database; determininga number of potential customers within each of the plurality of traveltime traces using at least one demographic information database;weighting the number of potential customers in the travel time traces;and determining the demand for the business using the weighted numbersof potential customers using the data processor.
 2. The method of claim1 further comprising determining a supply for the business in the marketarea.
 3. The method of claim 2 further comprising determining a netdemand for the business using the determined demand and the supply forthe business.
 4. A system for determining a demand for at least onebusiness located in a market area, the system comprising: means forreceiving a location input for the at least one business; means forcalculating a plurality of travel time traces around at least onebusiness location using at least one geographical information systemdatabase; means for determining a number of potential customers withineach of the plurality of travel time traces using at least onedemographic information database; means for weighting the number ofpotential customers in the travel time traces; and means for determiningthe demand for the business using the weighted number of potentialcustomers.
 5. The system of claim 4 further comprising means fordetermining a supply for the business in the market area.
 6. The systemof claim 5 further comprising means for determining a net demand for thebusiness using the determined demand and the supply for the business. 7.A system for determining a demand for at least one business in a marketarea, the system comprising: a user interface module for receiving alocation input for the at least one business; a travel time module forcalculating a plurality of travel time traces around at least onebusiness location using at least one geographic information database;and a processing module for: determining a number of potential customerswithin each of the plurality of travel time traces using at least onedemographic information system database comprising at least census data,weighting the number of potential customers with travel time traces, anddetermining the demand for the business using at least the weightednumbers of potential customers.
 8. The system of claim 7, wherein theprocessing module accesses competition supply data to determine a supplyfor the business in the market area.
 9. The system of claim 8, whereinthe processing module modifies the supply for the business in the marketarea by applying a supply model to the supply for the business.
 10. Thesystem of claim 7, wherein the processing module uses demographiccharacteristics data to determine the demand for the business.
 11. Thesystem of claim 10, wherein the processing module modifies the demandfor the business in the market area by applying a demand model to thedemand for the business.
 12. The system of claim 9, wherein theprocessing module determines a net demand for the business based on atleast the demand and the supply for the business.
 13. A data processorimplemented method for determining a demand for a product or servicewithin a plurality of census units located in a market area, the methodcomprising: receiving a location input for at least one businessoffering the product or service; calculating a plurality of travel timetraces around at least one business location using at least onegeographical information system database; determining a number ofpotential customers within each of the plurality of census units byusing at least one demographic information database; weighting thenumber of potential customers in the travel time traces to generate aweighted number of potential customers within each of the plurality ofcensus units; and determining the demand within each of the plurality ofcensus units for at least one product or service offered by the businessusing the weighted numbers of potential customers within each of theplurality of census units using the data processor.
 14. A data processorimplemented method for determining a demand for a product or servicewithin a plurality of census units located within a market area, themethod comprising: receiving a location input for at least one businessoffering the product or service; calculating a plurality of travel timetraces around at least one business location using at least onegeographical information system database; determining a number ofpotential customers within each of the plurality of census units usingat least one demographic information database; weighting the number ofpotential customers in the travel time traces within each of theplurality of census units; and determining the demand for the product orservice offered by the business using the weighted numbers of potentialcustomers within each of the plurality of census units using the dataprocessor.
 15. A system for determining a demand for a product orservice within a plurality of census units located within a market area,the system comprising: means for receiving a location input for at leastone business offering the product or service; means for calculating aplurality of travel time traces using at least one geographicalinformation system database; means for determining a number of potentialcustomers within each of the plurality of census units using at leastone demographic information database; means for weighting the number ofpotential customers in the travel time traces to generate a weightednumber of potential customers within each of the plurality of censusunits; and means for determining the demand within each of the pluralityof census units for at least one product or service offered by thebusiness using the weighted numbers of potential customers within eachof the plurality of census units.